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Lloyd's Maritime and Commercial Law Quarterly

LIABILITY FOR WORK DONE WHERE CONTRACT IS DENIED: CONTRACTUAL AND RESTITUTIONARY APPROACHES

Man Yip * and Yihan Goh **

This paper explores the divide between the law of contract and the law of restitution in dealing with the different situations that arise from one party commencing work prior to the conclusion of a formal contract. It argues that contract and unjust enrichment each have a proper role to play in dealing with such cases. First, it argues against a purely contractarian view that such cases should be exclusively resolved by the law of contract, through an implied collateral contract. Such a technique, applied vigorously, would result in nullifying the concept of “essential terms” and an artificial construction of parties intentions. Second, it dispels the myths that the law of unjust enrichment is inadequate to deal with the problem, by clarifying the enrichment test and the unjust factor to be applied in such cases. It will be shown that the defendant s assumption of the risk of financial responsibility for the benefit is key to establishing these two elements of the claim.

I. INTRODUCTION

It is not unusual for parties to commence work while negotiations on the contractual terms that are to govern their relationship are continuing. However, if negotiations break down and no formal contract is concluded, contractual,1 as well as restitutionary,2 disputes may well arise between the parties as to liability for the work already done. That different bases of liability are possible is not problematic in itself; problems arise when different courts come to different conclusions based on the same facts.3 Putting aside issues of evidence, this generates uncertainty in the law. Prominent commentators in this area generally advocate using principally one area of the law to deal with such disputes so as to avoid any uncertainty. Some of these commentators posit the expansion of doctrines which are


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